Biomass leads in renewable energy interest

By Anna Austin

Posted June 4, 2010, at 10:23 a.m. CST

Audit, tax and advisory firm KPMG has released its annual review of merger and acquisition activity within the renewable energy industry, results of which indicate that biomass is now the most attractive sector to potential investors and corporations this year, rising above both wind and solar.

The survey was conducted from January to March 2010 and the report were written in collaboration with VB/Research, a renewable energy research and data provider. The purpose of the research was to discover changes and trends in the renewable energy sector to provide insight on where the market is heading. Findings are based on a survey of more than 250 senior executives active in the renewable energy industry worldwide.
Looking at which renewable energy industry sectors are most attractive, 37 percent of respondents chose biomass, compared with solar (36 percent) and onshore wind (35 percent).

The report recognizes that while wind is still recording significant deal activity, research shows that dealmakers, particularly large companies such as the utilities, are looking for the next global trend and biomass appears to be positioned as one of the most active sectors. Andy Cox, energy partner at KPMG in the U.K., said biomass looks set to be the "new wind."

"Biomass plants have the potential to yield much higher returns than other renewable sources," he said. "A well-executed biomass plant can deliver substantially greater economies of scale than wind; and the heat generated from incineration can supply neighboring buildings, creating another revenue stream."

The biomass sector still faces difficult challenges, however, such as securing finance for construction, identifying long-term sources of fuel, and the visibility of fuel prices, according to the report. Cox added that turnkey contracts in biomass come at a significant price, adding up to 20 percent to the capital cost. "Despite the fuel and construction challenges, it is interesting to see that the companies with the money to support their convictions are driving biomass forward alongside their wind and solar portfolios, which are arguably easier to deliver in the short- to medium-term," he said.